The need for an increase or decrease in short-term borrowing can be predicted by
A) ratio analysis.
B) trend analysis.
C) a cash budget.
D) an income statement.

Question

Quizplus · Accepted Answer

A cash budget is a financial statement that estimates cash inflows and outflows for a specific period. By looking at the expected cash inflows and outflows, a company can predict whether it will need to borrow in the short term or whether it will have excess cash to invest. Ratio analysis and trend analysis can provide valuable information, but they do not directly predict a company's future borrowing needs. An income statement shows a company's revenues and expenses for a period but does not provide information specifically related to borrowing needs.

The Need for an Increase or Decrease in Short-Term Borrowing